False Certification Discharge

Did you receive federal loans to attend college, but didn't have a high school diploma or GED? 

Did you receive federal loans to train for a job you wouldn't be able to qualify for even with the education? 

Did someone else take out the federal student loan in your name? 

Did someone at the school forge your name on loan documents without your authorization?

If so, you’re eligible for a false certification discharge of your loan. This article will go into more detail about each of these types of false certification loan discharges. A discharge ends your loan like a cancellation or loan forgiveness program. The difference is that student loan forgiveness usually refers to the loan ending due to a period of time served in a teaching or public service job whereas discharge is for some other reason. 

There are three categories of false certification cancellations: 

• ability to benefit, 

• disqualifying status, and 

• unauthorized signature/payment either in the form of 

• • forgery by the school, or

  • identity theft. 

Ability to benefit. If your school falsely certified your eligibility for federal student aid, you, the borrower, can apply for a false certification discharge. So, if you as the borrower weren't given an "ability to benefit" exam or were given such an exam but it wasn't properly administered, you could meet the eligibility requirements for a false certification cancellation.

Disqualifying status. You received federal loans to train for a job you don’t qualify for even with the education. 

Unauthorized signature. Someone else took out a loan in your name, or the school you attended authorized the transfer of loan funds without your permission.

Regardless of the form of false certification, if you're approved, your repayment of the loan ends. False certification loan cancellations are only for William D. Ford Federal Direct Loan Program loans and Federal Family Education Loan Program (FFEL Program) loans made after January 1, 1986. These loans include Stafford Loans, Parent PLUS Loans, and Graduate PLUS Loans. Perkins Loans aren't eligible. 

False Certification Based on Ability to Benefit

If you don't have a high school diploma, GED, or other high school equivalence such as home-schooling proof, you have two choices to  qualify for aid. Ability to benefit exams are for proving your readiness for post-secondary education. The alternative to taking the exam is to accumulate six credit hours without financial aid.  If you fail the exam, you aren't allowed to receive federal financial aid. 

Since July 1, 2012, ability-to-benefit exams only qualify students that are enrolled in "career pathway" programs. There's some guidance about these "career pathway" programs on the U.S. Department of Education website. In the past, a school had been able to accept a sworn statement that a student had a high school diploma in place of the actual diploma or school transcript. For loans extended on or after July 1, 2020, these sworn statements are no longer accepted. 

You're eligible for a false certification if the school was required to give you, the borrower, an "ability to benefit" exam and did not give the exam.  Other examples of false certification due "ability to benefit" include:

1. The school certified your ability to benefit when you reported not having a high school diploma or equivalent;

2. The school gave you an ability to benefit test that wasn't approved by the U.S. Department of Education;

3. The school allowed you to retake the ability to benefit test before the required waiting period had expired;

4. The school helped you cheat on the ability to benefit test.

Procedure for Ability to Benefit Status False Certification Discharge

There's a special application form for the ability to benefit - false certification discharge. This is the latest form available and  - even though it expired on 9/30/2020 should be used until the website has changed and an updated application is available.

False Certification Based on Disqualifying Status

Disqualifying status is when you receive a federal student loan for which at the time of the loan, you failed to meet your state's legal requirements for the occupation you were being trained for. The disqualifying status is anything the Department of Education considers "disqualifying." A few disqualifying conditions include: physical or mental conditions, age, or criminal record. An example might be that you’re training to be an elementary school teacher, when you have a felony conviction on your record. Your state of residence doesn't allow schools to hire teachers who have felony convictions. In this case, you could get a false certification loan discharge. Disqualifying status isn't available for discharges on loans taken out on or after July 1, 2020.

Procedure for the Disqualifying Status False Certification Discharge

As with the other false certification loan discharges, there's a form specifically for disqualifying status. File this form with your student loan lender.

Unauthorized Loan or Payment

There are three types of unauthorized loan or payment: Unauthorized loan, unauthorized payment, and identity theft.

Unauthorized Loan

An unauthorized loan is also known as an "unauthorized signature." This is when the school signs your loan application or promissory note without your permission. To obtain a loan cancellation because the loan was unauthorized, you're required to state that you didn't sign the loan document or authorize the school to do so for you and provide five different specimens of your signature. Two of them  must be from within a year before or after the date of the contested signature. 

Unauthorized Payment

An unauthorized payment is when the school, without your authorization, signed for your lender to transfer funds to the school. To obtain a cancellation for unauthorized payment, you're required to state that you didn't endorse the loan check or sign the authorization for electronic funds transfer. You must also state you didn't authorize the school to do so and provide 5 sample signatures, two of which must have been made within a year before or after the date of the contested signature. Last, you must state that the proceeds of the contested disbursement were not delivered to you or applied to charges owed by you to the school.

Procedure for Unauthorized Loan / Payment

There's a special form available for unauthorized loan / unauthorized payment. Only use this form if you believe an employee of the school provided the unauthorized signature on your loan documents or payments. 

Identity Theft 

When the person forging the signature isn't a school employee, it's identity theft. The Department of Education's regulations prescribe the following steps for obtaining a loan discharge on the basis of identity theft:

1. Certify that you didn't sign the promissory note, or that any other means of identification used to obtain the loan was used without your authorization;

2. Certify that you didn't receive or benefit from the proceeds of the loan; 

3. Provide a copy of a local, State, or Federal court verdict or judgment that conclusively determines you were the victim of a crime of identity theft; and

4. If the judicial determination of the crime does not expressly state that the loan was obtained as a result of the crime of identity theft, provide:

5. 1. Give five different specimens of your signature. Two of these specimens must be from within a year before or after the date of the contested signature. 

   2. A statement of facts that demonstrate, to the satisfaction of the Department of Education, that eligibility for the loan in question was falsely certified as a result of the crime of identity theft committed against you.

When someone else has taken out a loan in your name, you may not know about it until you have checked your free credit report. If you determine you have been the victim of identity theft, you need to contact the loan servicer per the Department of Education website. To find the servicer, use this database on the Department of Education's website. 

In February of 2020, the Department announced there would be a new type of false certification loan discharge for forgery. This is the false certification to apply for in identity theft cases. See this page on the Department's website. Use this form to apply for this new “forgery” discharge for handling identity theft cases. This form instructs to send the form to the holder of the loan. The holder is often different from the servicer. You may want to send a copy to both. You'll notice this form expired on 10/31/2020. Use it anyway until the department makes the newest version available. 

How to Get the False Certification Discharge

The discharge application form should be returned to your loan holder per the instructions for the application form. The holder would normally be the lender itself such as a bank or the Department of Education. But, your payments are often sent to a separate loan servicer. Your bills come from the loan servicer. It might be a good idea to call the servicer and get address information for the holder (the original lender). 

Decision Process

If your false certification discharge is approved, your entire loan balance will be canceled and your loan repayment ends. Any payments you made on the loan will be refunded to you. If your discharge application is denied, you’ll still be responsible for making your loan payments. If you believe the denial was in error, you can ask the Department of Education to review your case. If the Department of Education denies your application, you can seek relief in federal district court.

Conclusion

If you’re eligible for the false certification discharge, you should take advantage of this program. Otherwise, you’ll be paying for an education that either you couldn’t use, or  you’ll be paying for an education you never received.